A study by the national housing campaign Everybody’s Home predicts that this fiscal year, the federal budget might miss out on between $111 million and $556 million due to negative gearing deductions claimed by short-term rental property owners.

In Australia, it is estimated that 167,955 entire homes are being used as short-term accommodations rather than long-term rentals, with owners still able to claim negative gearing and capital gains tax (CGT) discounts.

Negative gearing is a tax concession that applies when the cost of owning an investment outweighs the income it generates.

The owner can then deduct that net loss from their overall income and lower their total taxable income, and therefore reduce their tax bill.

It can apply to any kind of investment in Australia but is most commonly associated with investment properties.

While there isn’t an official count of short-term properties that are negatively geared, the Australian Taxation Office (ATO) notes that approximately half of all property investors use negative gearing each year.

Researchers who drew up the Everybody’s Home report looked at a range of outcomes.

The study indicates that if only 10% to 20% of short-term rentals are negatively geared, the annual cost to taxpayers could exceed $111 million.

But if 50 per cent of listings were negatively geared, the cost could balloon to $556 million.

This report was published today following the federal government’s recent acceleration of the promised 5% deposit Home Guarantee Scheme, potentially aiding thousands of Australians in purchasing their first homes.

But campaigners and some economists argue tax reform is also needed to take the heat off property prices.

Everybody’s Home spokesperson Maiy Azize says overhauling negative gearing has the potential to reclaim billions of dollars for the public purse.

“Everyday people are footing the bill for property investors to write off losses from holiday homes, all while families are being priced out of their communities because they can’t find affordable rentals,” she said.

“Renters across the country are being squeezed by soaring rents and a shrinking number of affordable homes – and in many parts of the country, short-stay accommodation is only making it worse.

“Generous tax breaks for investors, including for short-stay accommodation, are driving wealth inequality and pushing up house prices for everyone else.”